Fresh Del Monte Produce Inc. reports strong quarter

Fresh Del Monte Produce Inc. reported a doubling of net income for the second quarter that ended June 30.

“We are pleased with our performance for the second quarter as net income more than doubled and gross profit and gross margin increased substantially when compared with the prior-year period — all while continuing to reduce our debt,” Mohammad Abu-Ghazaleh, Fresh Del Monte’s chairman and CEO, said in a news release. “Our strategic efforts led by asset optimization, strategic partnerships, and product innovation continue to guide our decision-making process, which is beginning to reflect in our financial results.”

The common stock for the company was up nearly 6% in trading Aug. 2, with the price pegged at $27.94 per share at 1:20 p.m. Eastern.

Financial highlights for Q2 2023

Net sales for the second quarter of 2023 were $1.18 billion compared with $1.2 billion in the prior-year period. The net sales variance was primarily driven by the fresh and value-added products segment, specifically lower per-unit pricing of avocados due to market conditions, and lower sales volume of nontropical fruit, the release said. Net sales were partially offset by higher net sales in the company’s banana segment, driven by both per-unit pricing and volume, the release said.

Gross profit for the second quarter of 2023 was $116.8 million compared with $80.7 million in the prior-year period, an increase of 45%. Gross profit benefited from lower product and distribution costs in the fresh and value-added products segment combined with higher banana profitability, the release said.

Operating income for the second quarter of 2023 was $72.1 million compared with $34.3 million in the prior year.

Adjusted net income for the company was $46.2 million compared with $20.7 million in the prior-year period, the release said.

Fresh and value-added division net sales for the second quarter of 2023 were $677.6 million compared with $732.4 million in the prior-year period, primarily as a result of lower per-unit pricing of avocados due to market conditions, combined with lower sales volumes of non-tropical fruit, the release said.
 Partially offsetting the decrease were higher net sales of fresh-cut fruit, pineapples, vegetables, and melons due to higher per-unit selling prices and higher avocados sales volume.

Gross profit for the second quarter of 2023 was $62.1 million compared with $49.4 million in the prior-year period, an increase of 26%. The increase in gross profit was positively impacted by higher per-unit selling prices for most products in the segment and lower distribution and ocean freight costs, the release said. Additionally, higher gross profit of avocados, due to lower per-unit product cost, and higher demand for the marketer’s Honeyglow and Pinkglow pineapple varieties, positively impacted gross profit, the release said.

Partially offsetting the increase were higher production and procurement costs of most products which continue to be impacted by lingering inflationary pressures as well as the foreign exchange impact of a stronger Costa Rican colón.

As a result of these factors, gross margin increased to 9.2% compared with 6.7% in the prior-year period, the release said.

Banana net sales for the second quarter of 2023 were $448.8 million compared with $421.6 million in the prior-year period, primarily because of higher per-unit selling prices in Europe and North America and higher sales volume in Asia, Europe and North America, the release said.

Gross profit for bananas in the second quarter of 2023 was $50.5 million compared with $22.2 million in the prior-year period, an increase of 127%. The increase in gross profit was impacted by higher net sales and lower distribution and ocean freight costs partially offset by higher production and procurement costs due to the continuing impact of inflation combined with the foreign exchange impact of a stronger Costa Rican colón. As a result of these factors, banana gross margin more than doubled to 11.3% compared with 5.3% in the prior-year period, the release said.

The company’s total long-term debt decreased to $400.5 million at the end of the second quarter of 2023 from $472.7 million at the end of the first quarter of 2023, the release said. On Aug. 1, 2023, the company's board of directors declared a quarterly cash dividend of 20 cents per share, payable on Sept. 8, to shareholders of record on Aug. 16.